Blogrank

July 2010

Since February, the Swedish investment house Kinnevik has been holding 12% of Rocket Internet (Zalando, 7Trends, FP Commerce, etc). The option exists to raise this share to 25%. This is according to the 6 month report (PDF):

"In February Kinnevik completed the acquisition of shares and warrants in the online group European Internet Holding ("EIH") (previously Rocket Internet) for EUR 35 m.

The investment gives Kinnevik the right to acquire 25% of the company if all warants are exercised. Kinnevik has also directly invested EUR 5 m in two of EIH's portfolio companies.

EIH has a portfolio of e-commerce companies and other consumer-oriented online businesses, including an ownership in e-commerce company Zalando.

Kinnevik works closely with EIH and actively supports it in becoming the leading European online company."

Extrapolating from the 12% acquisition, the valuation of Rocket Internet at that time was 292 million euro.

Kinnevik, with a 2 million euro stake, was one of the shareholders of the Groupon aquired Citydeal. The remaining 3 million euro of direct investment went towards tariff comparison company R2 International, which Kinnek currently holds 20% of.

"Shares in the loss-making retailer closed last night at 167p, down from a listing price on the so-called "grey market" of 180p. Shares had traded as low as 155p.

On Tuesday afternoon Ocado, which sell Waitrose groceries over the internet, was forced to cut its IPO price by 20pc: to 180-200p from a previous range of 200-275p.

The fall gave Ocado the dubious accolade of having the poorest first day's performance of any London IPO since shares in Brookwell fell by 8pc in June 2008, according to Bloomberg data.

Tim Steiner, Ocado's chief executive, said that people are "missing things" about Ocado as they are "looking into the rear view mirror and looking at our historical performance – past cash flows, not future cash flows". "

At Wednesday’s IPO, Ocado valued at 937 million pounds. The original plan was 1.2 billion. Through the IPO, Ocado raised 200 million pounds of fresh capital which can be now used for further investments.

E-commerce investor duo Klaus Hommels and Oliver Jung are building in parallel to their private sales club network (“BrandsAlliance”) also a global network of Groupon clones with the support of the Swiss based Global Group Buying AG (PDF):

Garmz, the fashion startup from Vienna, seeks to attract young and undiscovered fashion designers with their complete outsourcing service. The company wants to offload all operative tasks from the designer. Designers can create their masterpieces and Garmz will take over the production and sales for them – at least for the ones which rank well within the community. The pitch: “You design fashion, we do the rest”.

Designers upload their designs to Garmz and other Garmz users can then give feedback, discuss and vote on their favorite designs. The designs which are supported by the community and have the possibility of mass production are then prototyped with the designer.

The prototype is then promoted by Garmz on the “Upcoming” area of the webshop, where users can make binding orders for the product. According to the amount of confirmed orders, Garmz manufactures the items and markets them under the designer’s own label via the Garmz webshop.

Designers will have maximum control over their creations and will also be able to control their profit margins using a pricing tool from the website.

The fashion world lives from borrowing ideas and mutual copying. But how many designers will be able to survive when their ideas can be copied even before production, because they are all publicly viewable? Garmz is depending on the speed-to-market advantage of their production, which is not 100% convincing.

If Garmz is successful and makes a name for itself in the fashion world, this could become a real problem. A possible solution would be different levels of viewing rights within the Garmz community.

That is still a case for the future. Garmz is in beta and doesn’t have all basic features online yet. At the moment, designers can upload design drafts. At the end of July, the first community features are planned to go online. The end of summer should see the first products being sold from the Garmz webshop.

Garmz has closed a seed financing round and according to own statements is now finally covered for the rest of this year. According to TechCrunch EU, the seed round was in the lower six figure range. The founders want to take up further talks with VCs later this fall.

"As it stands, garmz’s value proposition isn’t clear, isn’t game-changing or disruptive and so it’s difficult to believe they will become the fast-growing profitable business that can deliver on VC’s IRR expectations.

garmz’s team, however, will certainly execute on their strategy and have a couple of surprises up their sleeves that might make me think otherwise – let’s see!"

At the first Live Shopping Days conference in the summer of 2008, Exciting Commerce’s Jochen Krisch was able to see a good half a dozen live shopping business concepts which went beyond the all too oft seen focus on competitive pricing.

The locally focussed ideas roundly symbolized the Groupon concept, which launched in the fall of 2008. Groupon went on to trigger a third wave of live shopping frenzy after the “one deal per day Woot!” concept and private sales clubs such as Vente-Privée.

The feminine take on live shopping has been well implemented by the Daily Grommet (‘fresh finds, true stories’) which has been online since October 2008.

"I went on to explain my vision to disrupt how consumer products (that form 65% of our economy) get discovered and distributed.

The investor later said it gave him chills and that it was the best moment of the meeting. His sharing that personal response made me all the more confident to frame the vision as big as I see it."

In comparison to Groupon, the launch of the Daily Grommet gave a rather tentative impression. However in due course they have found their own style and are growing - in particular from an ever increasing product base as well as their explanatory video presentations. The latter can best be described as a mix of Martha Stewart and QVC.

Motivational elements such as counters, limited availability, etc are entirely missing. Instead, the founders are betting completely on the strength of the stories behind the products. Early in the year, the Daily Grommet labelled themselves as the “Birthplace of Citizen Commerce”.

"By introducing 250 new products per year and selling just $100,000 worth of each product, each vertical could bring in $25 million per year in gross revenues, she projects.

The plan for Grommet’s growth, Pieri says, is to build on the success of the original site by creating “verticals,” business-speak for topic-specific offerings, such as “Grommet Gear,” “Grommet Food,” “Grommet Garden,” and the like (the company has 12 product categories in mind altogether, Pieri says."

Although the Daily Grommet still needs to drive their sales more, it is otherwise still an outstanding example of how live shopping can look like. Useful to see are the background reports, typical of the Daily Grommet videos.

The British online supermarket firm Ocado is currently preparing its IPO. Ocado, claiming to be the “largest dedicated online supermarket by turnover in the world” has published its prospectus (PDF) on 284 pages and offers a deep look into the market for groceries via online channels.

Ocada has around 240,000 active customers who generated gross revenues of 427 million pounds in 2009 (2008: 341 million pounds, 2007: 291 million pounds). The EBITDA results have been positive for two years, nevertherless, operatively Ocado has been still writing down losses.

Via IPO, Ocado wants to raise fresh capital and are working towards a valuation of 1.18 billion pounds.

The company was founded by ex-investment bankers in 2000 and launched operations in 2002. Deliveries are made via a central warehouse and several distribution stations. With this infrastructure, Ocado can reach 66% of all British households. Ocado ranks as the fourth largest British online supermarket, behind Tesco, Sainsbury and ASDA.

John Lewis, the parent of the British grocery store chain Waitrose, is via its pension fund one of the largest shareholders of Ocado. Waitrose itself operates WaitroseDeliver; the Ocado prospectus mentions some details of an existing non-competition agreement between the two companies.

Although the main attention is on the big US players, Asia’s e-commerce innovators are increasingly making their presence known internationally.

Alibaba announced their first takeover in the US a couple of weeks ago (see interview). And the former primarily local Japanese concern Rakuten has its sights set now on the world market and is making a strong international push.

Last May, Rakuten bought Buy.com in the US for $250 million. Following in June, they took over Priceminister in France for 200 million euro.

Rakuten will use a federation model for their global business. Presented in the video are the companies and strategies of Rakuten, Priceminister, Buy.com and Baidu. Approaching the end of the video is a Q&A session for media representatives and analysts. Here the associated charts (pdf).

"In the last 5 years we've made two acquisitions and a strategic investment around social shopping. We have two different pieces of social shopping currently and we'll be launching a new collaborative shopping tool, that will allow users and merchants on our site to be able to talk with other users, to chat real-time with their friends, with their customers and it will create, once again, a stronger in-store-experience online."

The German market doesn’t (yet) seem to be Rakuten’s focus. Buy.com is already represented here.

However it would likely turn out to be a real challenge to conquer the established European market using a French enterprise such as Priceminister.

At the moment, concentration is on the south and east European (growth) markets. But there are certainly a few German candidates which would indeed fit perfectly to the Rakuten strategy.

As ReadWriteWeb reports, Twitter is preparing the launch of Earlybird campaigns ("Twitter to Publish Shopping Deals Through @EarlyBird Account"):

"Carolyn Penner, friendly communication contact at Twitter Inc., said to us by email after publication: "There are interesting things in store for @earlybird. Keep waking up early and you might be the first to find out what they are."